Builders began work on fewer projects in 2010

In this Jan. 19, 2011 photo, builders work on a twelve and ten story apartment building project under construction in the Little Haiti area of Miami. Builders began work on fewer homes, shopping centers and other types of construction projects in 2010, as total building activity fell to the lowest point in a decade.(AP Photo/Alan Diaz)
— AP

In this Jan. 19, 2011 photo, builders work on a twelve and ten story apartment building project under construction in the Little Haiti area of Miami. Builders began work on fewer homes, shopping centers and other types of construction projects in 2010, as total building activity fell to the lowest point in a decade.(AP Photo/Alan Diaz)
/ AP

In this Jan. 18, 2011 photo, workers are shown during the construction of the University of Miami's Life Science & Technology Park in Miami. Builders began work on fewer homes, shopping centers and other types of construction projects in 2010, as total building activity fell to the lowest point in a decade.(AP Photo/Wilfredo Lee)— AP

In this Jan. 18, 2011 photo, workers are shown during the construction of the University of Miami's Life Science & Technology Park in Miami. Builders began work on fewer homes, shopping centers and other types of construction projects in 2010, as total building activity fell to the lowest point in a decade.(AP Photo/Wilfredo Lee)
/ AP

In this Jan. 19, 2011 photo, builders work on a twelve and ten story apartment building project in the Little Haiti area of Miami. Builders began work on fewer homes, shopping centers and other types of construction projects in 2010, as total building activity fell to the lowest point in a decade.(AP Photo/Alan Diaz)— AP

In this Jan. 19, 2011 photo, builders work on a twelve and ten story apartment building project in the Little Haiti area of Miami. Builders began work on fewer homes, shopping centers and other types of construction projects in 2010, as total building activity fell to the lowest point in a decade.(AP Photo/Alan Diaz)
/ AP

WASHINGTON 
Builders began work on fewer homes, shopping centers and other projects in 2010, pushing total building activity down to the lowest point in a decade.

Construction spending dropped 10.3 percent last year, marking the fourth annual decline, the Commerce Department said Tuesday. It fell to $814.18 billion in 2010, the lowest level since 2000.

And the year ended on a weak note. Builders started fewer homes and other projects in December, pushing activity down 2.5 percent for the month.

Builders have struggled with falling demand since the housing bubble burst, triggering a deep recession. The downturn sharply lowered overall economic activity and that cut into demand for office buildings, hotels and shopping centers.

Analysts said harsh winter weather had some impact on the weak December numbers. But other factors are likely to keep the industry from seeing significant gains in the early months of this year.

Homebuilders are having a hard time competing with the record number of foreclosures and declining home prices. The budget crises at the state and local level, along with fading federal stimulus money, have governments pulling back on projects. Rising vacancy rates and declining rents are dragging on commercial real estate construction.

David Wyss, an economist for Standard & Poor's in New York, said a healthy level for the construction industry would have spending around $1.5 trillion annually - almost double the level in 2010. He said it will probably take until the middle of this decade to reach that point.

"We still have a big overhang of unsold homes out there," Wyss said. "And on the nonresidential side, the question is jobs. You don't need to build another office building until you get the jobs back."

The December drop in construction left spending at a seasonally adjusted annual rate of $787.9 billion, the lowest monthly level since July 2000. That surpassed the previous low hit in August and underscored that conditions in the building industry remain extremely weak.

For the month, builders spent 4.1 percent less for residential projects. Work on nonresidential projects dropped 0.5 percent, with work on hotels and shopping centers both declining.

Builders have had trouble obtaining financing for projects since the recession began. Banks have tightened lending standards in response to higher default rates.

Spending on government projects fell in December 2.8 percent. State and local spending dropped 1.8 percent and spending by the federal government plunged 11.6 percent to the lowest level since October 2004.

(This version CORRECTS Changes the second paragraph to correct the number of years of decline from five to four. This story is part of AP's general news and financial services.)